Addis Ababa FFD3 talks risk deadlock over UN agency for tax

15 Jul

Posted by The Ethiopia Observatory (TEO)
by Eliza Anyangwe, The Guardian

    * Aid organisations fear that negotiations at the Financing for Development conference may go into deadlock over the issue of a UN agency for tax.

    * “The G77 and advocacy groups want to see certain issues brought before a global tax body, such as whether or not multinationals should publicly declare the amount of tax they pay, and the question of where corporations pay their taxes.”

    * “But international charities such as Action Aid have accused the rich nations, including the UK, of blocking progress, and some say that the UK and US, among others, are now lobbying hard to prevent the creation of UN agency to the point of risking deadlock in the talks.”

Civil society organisations are warning that the Financing for Development (FFD3) talks which began on Monday 13 July, may go into deadlock, or even collapse as negotiators reach an impasse over the creation of a new global tax body.

The proposal to replace the United Nations expert committee on tax with a fully-fledged agency is seen by governments, multilateral agencies and NGOs alike as the most important issue on the conference agenda, as it would give developing countries an equal say in global tax rules and help them combat tax avoidance and evasion. But international charities such as Actionaid have accused the rich nations, including the UK, of blocking progress, and some say that the UK and US, among others, are now lobbying hard to prevent the creation of a UN agency to the point of risking deadlock in the talks.

Developing countries currently lose $1tn a year in illicit financial flows, far more than they receive in aid, which at its all-time high in 2013 was about $135bn a year. Fixing the tax problem has become a growing priority even for the G7 group of industrialised nations. But according to civil society representatives, global tax standards are still being developed behind closed doors at the Organisation for Economic Cooperation and Development (OECD), excluding 80% of the world’s countries from the decision-making processes.

The G77 and advocacy groups want to see certain issues brought before a global tax body, such as whether or not multinationals should publicly declare the amount of tax they pay, and the question of where corporations pay their taxes. The OECD advocates that tax should be paid in the countries where headquarters are located, while developing countries are asking that more tax be paid in countries where companies carry out their economic activities.

Tove Maria Ryding, policy and advocacy manager at the European Network on Debt and Development (Eurodad) said: “We have a situation where the 34 member states of the OECD – often known as the ‘rich countries club’ – want to make decisions on global tax standards and the main argument for it is that they’ve been doing it for 50 years.”

“Because of the OECD’s rules, we are right now moving taxing rights from the south to the north,” says Ryding. “This is clearly about power. The OECD assumes that by setting global tax standards they will be able to control the system. But look at where we’ve ended up after all these years of the OECD making decisions. Multinationals are not paying taxes anywhere; the fact that our countries can’t cooperate on these matters is the key reason companies are still hiding money in Switzerland. The whole idea that you can have a small club of countries that makes the rules and everyone else follows suit is utterly naïve. ”

The conference is focussed on the issue of agreeing how to finance the new set of global sustainable development goals and the climate treaty that will both, everyone hopes, be agreed later this year.

While calls for tax justice at FFD3 grow louder and more disruptive (a group of activists were escorted out of Tuesday morning’s plenary by security after unveiling a banner that read “If you’re not at the table, you’re on the menu”), the rich nations and the OECD announced two parallel tax initiatives: Tax Inspectors Without Borders (TIWB) and the Addis Ababa Tax Initiative.

TWIB is a partnership between the OECD and the United Nations Development Programme and aims to help developing countries bolster domestic revenues by strengthening their tax audit capacities. The Addis Ababa Initiative, supported by several donor countries, takes a two-pronged approach: improve tax rules for the benefit of all countries and train qualified inspectors in developing countries who will collect the tax. A compromise offer from South Africa and Ethiopia for an intergovernmental expert committee will also be on the table for discussion today.

British secretary of state for international development, Justine Greening defended the Addis Tax Initiative. “I don’t think we should kid ourselves that a new UN structure will fix this,” Greening said. “Yes, we need to improve the international architecture but critically we now need to work bilaterally with countries. This is not about putting in place a new UN structure. There is already a committee of experts who can play an important role but in the end it is going to come down to many of the biggest economies in the world, the G7, countries actually getting their house in order.”

Swedish prime minister Stefan Löfven called for a pragmatic approach. “Don’t make this about one camp here and another camp there. All member countries agree that we need to set up and improve but we don’t believe that the UN body is the answer. There are several countries that do not want it and we need a resolution that everybody supports.”

“They [negotiators] are talking about a potential collapse in the negotiations because of these issues,” says Ryding. “If FFD3 collapses, the post-2015 negotiations [in September] are going to be at risk and so will the climate treaty at the end of the year. So the question is, is it really so important for you to exclude developing countries from getting influence on global tax standards that you are willing to jeopardise the sustainable development goals and the climate negotiations?”

A Save the Children spokesperson said: “Collapse of the negotiations would be a real disaster. From the social compact to the commitment to focus on domestic resources there’s still a lot of importance in the draft agreement. We’re urging negotiators to do their job and come up with an ambitious outcome.”

ActionAid UK Tax Campaign Manager Natasha Adams said: “Developing countries will continue to lose billions of dollars a year to tax dodging by multinational companies unless they are given an equal seat at the negotiating table. That is why the UK and other wealthy countries must back a United Nations tax body to make tax fair.”

For now, the negotiations continue apace and leaders seem to remain hopeful that 2015 will deliver a transformative development agenda.
 

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